Given pension plan assumptions of 7-8% annualized returns how many of them can survive negative returns for seven years? It’s important to note that GMO is talking about “real” inflation-adjusted returns with an assumption of mean-reversion inflation to 2.2% over 15 years.

Still, that leaves US equities at zero to -1% returns and US bonds at negative 2.4% returns.

Even if GMO is wrong by say 3%, many pension plans will be in deep serious trouble at those returns.

Illinois Pension Plans

I keep harping about this issue, but it’s an important one. In the state of Illinois, and in spite of an enormous rally in the stock market since 2009, Illinois pension plans are only 39% funded.

Congratulations go to the Illinois General Assembly Retirement System (GARS) for having one of the worst, (if not the worst) pension plan in the entire nation. It is 16% funded.

No doubt, that increases the pressure of the General Assembly to put the burden of bailing out the system on the backs of Illinois taxpayers.

Fraudulent Promises

Pension promises were not made in good faith.

Rather, pension promises were the direct result of coercion by public unions on legislators, mayors, and other officials willing to accept bribes because they shared in the ill-gotten gains of backroom deals at taxpayer expense.

Illinois taxpayers cannot be held accountable for coercion of public officials by public unions. Fraudulent promises will be held “null and void” in any “non-stacked” court of law in the nation.

Given the 31% funding of the Illinois Judicial Pension Plan (JRS), the sorry state of Illinois pensions is likely headed to federal courts.